Finance Target Operating Model

A Finance Target Operating Model (TOM) is a blueprint defining how a finance function should operate to achieve its strategic goals. It's not a static document but a living framework that evolves with business needs and market changes. It aims to optimize processes, technology, people, and location decisions to deliver greater efficiency, improved controls, and enhanced decision-making support.

The TOM addresses several key dimensions:

Operating Model Elements

1. Process Standardization & Harmonization

This focuses on streamlining and standardizing finance processes across different business units or geographies. Key elements include implementing best-practice methodologies, reducing process variations, and leveraging automation to improve efficiency and accuracy. Common areas for standardization include accounts payable, accounts receivable, general ledger accounting, and financial reporting.

2. Technology Enablement

The TOM considers the optimal technology landscape to support finance operations. This includes selecting and implementing Enterprise Resource Planning (ERP) systems, robotic process automation (RPA), data analytics platforms, and other tools to automate tasks, improve data quality, and enhance reporting capabilities. Cloud-based solutions are often a key consideration for scalability and flexibility.

3. Organizational Structure & Talent

This aspect defines the roles and responsibilities within the finance function and the skills required to perform those roles effectively. It addresses questions such as: Should the finance team be centralized, decentralized, or operate with a shared services model? What are the required skills for finance professionals in the future? It also considers talent development and retention strategies.

4. Location Strategy

The TOM evaluates the optimal location(s) for finance activities. This might involve establishing shared service centers or outsourcing certain functions to lower-cost locations. Factors to consider include cost, talent availability, language skills, and time zone differences.

5. Data & Analytics

The TOM emphasizes the importance of data as a strategic asset. It focuses on establishing robust data governance frameworks, improving data quality, and developing analytical capabilities to provide actionable insights to business leaders. This enables data-driven decision-making and improves forecasting accuracy.

6. Governance & Controls

This element defines the policies, procedures, and controls to ensure compliance with regulatory requirements and internal policies. It includes establishing clear accountability, implementing robust internal controls, and monitoring key performance indicators (KPIs) to identify and mitigate risks.

Benefits of a Finance TOM

A well-defined and implemented Finance TOM offers several benefits, including:

• Reduced costs and improved efficiency
• Enhanced data quality and decision-making
• Improved compliance and risk management
• Greater agility and responsiveness to business needs
• Enhanced talent attraction and retention

Developing a Finance TOM requires a thorough understanding of the business strategy, the current state of the finance function, and the desired future state. It's a collaborative process that involves key stakeholders from across the organization. Successfully implementing a TOM can transform the finance function into a strategic partner that drives business value.